In this edition, we examine the dark side of bitcoin and take a peek behind the curtain of the dark net. While cryptocurrency has made some genuine strides this year in terms of public acceptance, its anonymous nature continues to attract criminal activity. Investor confidence remains unwavering as millions of dollars continue to pour into the blockchain startup space, perhaps making 2017 the year that cryptocurrency finally “went mainstream.”

Popular Darknet Market Collapse Reeks of Scam

The biggest of the darknet markets, AlphaBay, went down earlier this week and has not resumed service. It is suspected that the operators of the market performed what is commonly known as an “exit scam,” hiding behind the anonymity of cryptocurrency technology to flee with millions of dollars of its users’ bitcoin and ether. AlphaBay is estimated to have conducted between $600,000 – $800,000 a day in market transactions. Its users shopped for illicit substances and materials in an Ebay or Amazon-like fashion using popular cryptocurrencies such as BTC, ETH and XMR as payment.

AlphaBay is just the latest in an extensive line of major darknet markets to perform exit scams or go down for other reasons. Evolution, Agora and Nucleus are among the successors to the original Silk Road marketplace that are accused of performing exit scams. Unlike Ross Ulbricht, the imprisoned founder of Silk Road, the owners of these marketplaces could vanish into the night with vast hordes of bitcoin before they could be taken down in a government operation. Much of what happened to these administrators afterwards cannot be traced, except through watching ill-gotten bitcoin being tumbled into an anonymous haze.

Vendor Indicted on State and Federal Charges

Just a few days after the blackout, it was revealed that an AlphaBay vendor had been indicted on charges of promoting illegal substances and will face other charges related to the overdose death of a woman in Florida. Despite previous knowledge of deaths attributed to the substances he was selling, the vendor kept selling drug “analogs,” which sometimes fall into legally-gray areas, meaning they are only legal until the government has the chance to schedule and regulate them. Although vendors commonly sidestep the law by advertising and packaging their products as “not for human consumption,” this didn’t stop 19 people from overdosing on potent substances believed to be sold by the same vendor.

Whether the heat being turned up on AlphaBay has anything to do with their decision to flee or not remains to be seen. One thing that is assured is that determined buyers will continue to frequent other known dark markets, and new markets will emerge to replace the old. In response, law enforcement will continue to step up and sophisticate their monitoring of darknet activities. Both sides continue to grow at an exponential rate.

Though stories of fraud, drugs and other criminal behavior continue to hamper cryptocurrency’s popularity and give it negative connotations in general, there is no stopping bitcoin, or the power of decentralization via the blockchain itself. It seems as if a technological revolution forged on the libertarian principles of bitcoin is currently taking place, silently and online. Even Satoshi Nakamoto himself, founder of bitcoin and inventor of the blockchain once stated regarding its potential value to society:It’s very attractive to the libertarian viewpoint if we can explain it properly. I’m better with code than with words though.

Also in the News

In what remains the biggest bitcoin scandal of all-time, ex-CEO of the infamous MTGOX bitcoin exchange Mark Karpeles goes on trial this week in Japan, to face charges of embezzlement and fraud. Karpeles is suspecting of stealing over $400 million worth of bitcoin from his customers when his exchange filed for bankruptcy in 2014. If he still had access to any of these bitcoins, their immense gains in profit since 2014 could lead MTGOX into solvency. However, this possibility is yet to be determined.

Wall Street experts predict a continued rise in the price of bitcoin, as more analysts chime in with price predictions; one market strategist saying bitcoin could go as high as $55,000 by 2022, and another saying it was likely to go to $5,000 “within a few months.” As bitcoin stays above the price of gold, comparisons between the two are frequently made, with one analyst stating that cryptocurrencies are now actually “cannibalizing the gold trade” as more investors are beginning to put their faith in the security of the blockchain.

Cryptocurrency ICOs continue to be branded as the next big high-risk moneymaker by major online news publications. A ranking of 2017’s 50 best blockchain startup companies illustrates the massive swing in popularity that cryptocurrency has enjoyed this year. Even though the year is barely more than halfway over, bitcoin is up close to 200% from its price on January 1st, a remarkable gain which remains undeterred by a ceaseless association with cybercriminal activity.

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